To increase transparency, the Reserve Bank on Wednesday directed regional rural banks to disclose the commission they receive from mutual funds and insurers for referring their products to customers.
“Keeping in view the need for transparency in the interest of the customers… it has since been decided that Regional Rural Banks (RRBs) should disclose to the customers, details of all the commissions or other fees received, if any, from various mutual fund or insurance companies for marketing or referring their products,” RBI said in a notification.
The above instructions, the RBI said, would come into force with immediate effect.
The RBI further said RRBs may be marketing or referring, several competing products of various mutual fund or insurance companies to their customers.
Last month, the Reserve Bank directed commercial banks to disclose the commission they get from mutual funds and insurance companies for marketing or referring their products.
*****************************************************************
RBI circular is as follows
Marketing /Distribution of Mutual Fund Units /Insurance etc., products by RRBs
RBI/2009-10/250
RPCD.CORRB.No.45/03.05.33/2009-10
December 09, 2009
The Chairman
All Regional Rural Banks (RRBs)
Dear Sir,
Marketing /Distribution of Mutual Fund Units /Insurance etc., products by RRBs
Please refer to our circular RPCD.No.RRB.BC.82/03.05.33/2005-06 dated May 17, 2006 allowing RRBs to undertake marketing of units of mutual funds as agents subject to certain terms and conditions.
2. Similarly, in terms of paragraph 2 of our Circular RPCD. CO. RRB.BC.No.99/03.05.33(G)/2004-05 dated May 12, 2005, RRBs were allowed to undertake insurance business on a referral basis without any risk participation through their network of branches subject to certain conditions. Further, in terms of our circular RPCD.CO.RRB.BC.No.86/03.05.33(G)/2006-07 dated May 03,2007, RRBs have been permitted for taking up corporate agency business for distribution of insurance products without risk participation subject to conditions mentioned in para 2 of the said circular.
3. In all the activities referred to above, it is likely that RRBs may be marketing / referring, several competing products of various mutual fund / insurance companies to their customers. Keeping in view the need for transparency in the interest of the customers to whom the products are being marketed / referred, it has since been decided that RRBs should disclose to the customers, details of all the commissions / other fees (in any form) received, if any, from the various mutual fund / insurance companies for marketing/ referring their products.
4. The above instructions will come into force with immediate effect.
5. Please acknowledge receipt of the circular to our Regional Office concerned.
Yours faithfully
(R.C.Sarangi)
Chief General Manager
